Wednesday, September 30, 2009

Last week, the Group of 20 announced that they had agreed to a far-reaching effort to revamp the economic system, which, if carried out by governments, would lead to much tighter regulation over financial institutions, complex financial instruments and executive pay. They could also lead to big changes and more outside scrutiny over the economic strategies of individual countries including the US.

Meanwhile, the U.S. House and the Senate now reviewing the Obama administration plan to overhaul financial regulations in hopes of preventing another crisis. Morgan Stanley CEO John Mack, who's stepping down at the end of the year, is calling for a single regulator to oversee financial institutions worldwide. “A better system would be one uber-regulator,” Mack told Bloomberg in an interview. “We do need an overall systemic-risk management that everyone buys into. It’s not a U.S. systemic boundary — it’s a global systemic risk manager.”

Wednesday, September 23, 2009

Obama administration on Wednesday abandoned a significant provision in the face of widespread political and industry opposition. It dropped a requirement for financial services companies to offer “plain vanilla” products, like 30-year fixed mortgages and low-interest, low-fee credit cards. NYT discusses political cave-in. and that unity from the darkest days of the crisis have dissolved. The acrimony could further delay or dilute the administration plans to rewrite rules for the financial system.

Monday, September 21, 2009

Chairwoman Mary Schapiro said on Friday that the S.E.C. will probably require “some level of public reporting,” as it currently does for mutual funds. She said the agency was “very aware of the tension” involved in requiring more disclosure because hedge funds don't want competitors to “front-run.”

Monday, September 14, 2009

Bulge Bracket trading and other services to hedge funds scaled back last year as their clients posted losses or closed. Prime-brokerage businesses, including some just launched in 2009, competing fiercely to attract hedge funds as clients. Some of the newer and lesser-known players: Cantor, FBR Capital Markets, Jefferies, Merlin, Conifer Securities. Merlin plans to announce a partnership with Northern Trust, to allow Merlin clients seamlessly to "custody" (hold in safekeeping) assets at NT. 9/15 WSJ for more.

Friday, September 11, 2009

Economists debate cause and effect of Lehman Brothers' collapse a year ago and politicians and the public seem to blame the financial crisis on the banking sector. Furor has died down, some banks proving to be surprisingly resilient, yet Wall Street still faces increased regulation and political pressure. Update from Economist.com: "Wall Street's new shape" leads off: AT THE press of a button, double doors sweep open: Welcome to the office of Lloyd Blankfein, chief executive of Goldman Sachs.

Sunday, September 6, 2009

Credit Rating agency DBRS is reviewing nine proposals for life-insurance securitizations including from Credit Suisse. Goldman Sachs has developed a trading index of life settlements, so traders/investors can bet whether people will live longer than expected or die sooner than planned. The index is similar to stock indices that allow investors to bet on the direction of the market without buying individual stocks. Moody's has been approached about securitizing life settlements, but has yet to see a portfolio that meets its standards.

Andrew Terrell thinks securitized life policies have big potential, explaining that investors want to spread their risks and constantly looking for new investments that do not move in tandem with their other investments. Terrell was co-head of Bear Stearns's longevity and mortality desk - which traded unrated portfolios of life settlements - and later worked at Goldman on a trading platform for life settlements. "It's an interesting asset class because it's less correlated to the rest of the market than other asset classes".

Not quite a done deal: The insurance industry is girding for a fight: Just as all mortgage providers were tarred by subprime mortgages, so too is the concern for life insurance companies that they would be tarred with the brush of subprime life insurance settlements. Both Standard & Poor’s and Moody’s, which gave out many triple-A ratings for securitized subprime mortgages and later were burned, are approaching life settlements with greater caution.

“The securitization of life settlements adds another element of possible risk to an industry that is already in need of enhanced regulations, more transparency and consumer safeguards,” said Senator Herb Kohl, who is chairman of the Special Committee on Aging. More from NYT.